South Korea weighs crypto market makers after JPYC trades at 4 times peg
Crypto market making is effectively restricted under South Korea’s manipulation rules, but regulators are reconsidering the approach after a JPYC spiked on Upbit this month.
South Korea is considering allowing market makers in its digital asset market, following a recent spike in the value of a yen-backed stablecoin on a major exchange. Crypto exchange Upbit launched trading of JPYC, a stablecoin pegged to the Japanese yen, on September 17, with the market price opening at 12 Korean won per JPYC. However, it quickly reached a peak of 37.6 Korean won within an hour, more than quadrupling its intended value.
This sudden surge was attributed to low liquidity on Upbit's platform, according to the exchange. In a recent statement, Yoo Young-joon, a director at South Korea's Financial Services Commission (FSC), said the agency would review the introduction of systems like market-making to improve the efficiency and stability of the digital asset landscape.
He also acknowledged criticisms regarding user losses that occurred following the price surge after JPYC's listing. Currently, South Korea's Virtual Asset User Protection Act does not include an exemption for market-making from its market manipulation provisions, which is why market makers are currently unable to provide liquidity in crypto markets.
South Korean academics have been debating the idea of market-makers in the crypto market for some time. In a 2024 paper from Seoul Law Review, KB Securities researcher Lee Min Jung argued that allowing crypto market making could amount to market manipulation, and thus was not permitted at the time. However, she suggested that regulators could consider a carve-out once the market becomes more stable.
Another study by Yoonyoung Choi from the Korbit Research Center had called for a formal market-making framework, citing the absence of such a system as a major contributor to liquidity problems and price discrepancies in South Korea's crypto market. This potential market-making system comes as South Korea is working to establish a broader regulatory framework for its crypto industry.
The FSC announced in July its plans to introduce a consolidated Digital Asset Basic Act, covering stablecoins and the wider crypto market, including rules for digital asset businesses, exchanges, disclosures, and internal controls. However, several key aspects of the legislation, including rules for won-denominated stablecoin issuers, have yet to be finalized.
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